Value-added tax (VAT)
VAT is chargeable on all taxable goods and services supplied in, or imported into, Mainland Tanzania. The standard rate of VAT is 18%, but the export of goods and certain services is eligible for zero rating. Businesses with an annual taxable turnover of more than TZS 100 million must register for VAT. The Commissioner has the discretion to register (as intending traders) investors whose projects have not commenced production of taxable supplies but wish to be VAT-registered in order to reclaim the tax they incur on start-up costs. A business that only makes exempt supplies is unable to register for VAT and, consequently, unable to recover the VAT incurred on inputs.
Registered businesses must submit VAT returns, and pay any tax due, on a monthly basis.
There is also mandatory registration for professional service providers (e.g. lawyers and accountants) and government entities/institutions carrying on economic activities. A non-resident who carries on an economic activity in Mainland Tanzania without a fixed place (e.g. non-resident suppliers of B2C electronic services) and makes taxable supplies in excess of the VAT registration threshold is required to appoint a VAT representative.
For imported goods, VAT is payable at the time of importation together with any customs and excise duties. VAT payable with respect to capital goods (as defined) imported in Tanzania may be deferred, subject to certain procedures being followed.
For imported services, VAT is accounted for by registered businesses through a 'reverse-charge' mechanism, and such accounting is only relevant where a taxpayer has exempt supplies of 10% or more out of total supplies.
Depending on the industry, there are a number of exempt supplies. These include (this list is not exhaustive):
- Agricultural implements, agricultural inputs, livestock, basic agricultural products and food for human consumption; implements for fisheries; and bee-keeping and dairy equipment.
- Import of food, clothing, and shoes donated to non-profit organisations for free distribution to orphanages or schools for children with special needs in Mainland Tanzania.
- Goods imported by non-profit organisations for the provision of emergency and disaster relief (conditional).
- Goods imported by religious organisations for the provision of health, education, water, and religious services (conditional).
- Educational services provided by a relevant approved educational institution; education materials.
- Laboratory equipment and reagents imported by a registered educational institution and to be used solely for educational purposes.
- Goods eligible for relief under the East African Customs Management Act (where imported by a registered and licensed explorer or prospector for exclusive use in oil, gas, or mineral exploration or prospecting activities).
- Various goods imported by a natural gas distributor (including compressed natural gas [CNG] plants equipment, natural gas pipes, transportation and distribution pipes, CNG storage cascades, CNG special transportation vehicles, natural gas metering equipment, CNG refuelling of filling, gas receiving units, flare gas system, condensate tanks and leading facility, system piping and pipe rack, and condensate stabiliser).
- Healthcare, medicine, or pharmaceuticals products, including food supplements or vitamins supplied to the government; articles designed for people with special needs; funeral services.
- Fire-fighting vehicles imported by the government and fire-fighting equipment.
- Sale of vacant land.
- Lease, license, hire, or other form of supply, to the extent that it is a supply of the right to occupy and reside in residential premises.
- Water (except bottled or canned water or similarly presented water).
- Supply of solar panels, modules, solar charger controllers, solar inverters, solar lights, vacuum tube solar collectors, and solar batteries.
- Unprocessed edible vegetables.
- Food supplements or vitamins supplied to the government.
- Water treatment chemicals, as approved by the Minister responsible for health.
- Aviation insurance.
- Dam liner.
- Insurance for workers compensation.
- Pasteurised and unpasteurised goat and cow milk, excluding milk with additives and long-life milk.
- Supply of aircraft lubricants of HS Codes 2710.19.51, 2710.19.52, 3403.19.00, and 3403.99.00 to a local operator of air transportation.
- Imported refrigerated containers of HS Code 8418.69.90 by a person engaged in horticulture for exclusive use in horticulture.
- Imported grain drying equipment of HS Code 8419.31.00 by a person engaged in agriculture for exclusive use in agriculture.
- Importation of aircraft lubricants, airline tickets, brochures leaflets, calendars, diaries, headed papers, and airline uniforms engraved or printed or marked with airline logo and imported under a Bilateral Air Services Agreement between the Government of United Republic of Tanzania and a foreign government.
Export of goods and certain services is zero-rated (i.e. taxable at a rate of 0%).
The VAT Act contains restrictions on claiming input tax. For example, one cannot claim VAT incurred on entertainment, sporting, social, or recreational clubs or associations, nor on spare parts and repair or maintenance costs in respect of passenger vehicles. The VAT Act also restricts claiming of input tax incurred on exportation of raw minerals, raw forestry products, raw aquatic products, and raw fauna products.
The input tax claim time limit is six months. However, this time limit starts to run not only by reference to the date of the tax invoice/fiscal receipt but also by reference to the date of the time of supply.
Input tax incurred on goods in the six months prior to VAT registration can be claimed no later than in the third VAT return submitted following registration.
A company with taxable supplies of more than 90% of total supplies is entitled to full input tax credit while a company with taxable supplies less than 10% of total supplies is not entitled to claim any input tax incurred.
A company with taxable supplies between 10% and 90% of total supplies is entitled to partial input tax recovery. Two methods of apportionment, namely the average method and direct attribution method, can be used. Imported services are not taken into account as supplies when determining the allowance of input tax for partial exemption purposes.
Businesses entitled to VAT refunds can claim any remaining credit six months after the refund first became due, subject to all intervening returns being rendered. Any claim for a VAT refund must be supported by an auditor's certificate of genuineness. Businesses in a consistent refund position (e.g. exporters) may apply for approval to lodge their refund claims on a monthly basis.
The VAT Act includes specific requirements to be met by a fiscalised tax invoice to facilitate a refund claim. This includes claims made by diplomats and international organisations. A fiscal receipt is defined to include receipt issued by the Government Electronic Payment Gateway.
VAT in Tanzania Zanzibar is administered under a separate but similar legislation.
Tanzania is a member of the East African Community, which became a Customs Union on 1 January 2005 on the implementation of the East African Customs Union Protocol. This protocol provides for a common external tariff (CET), elimination of internal tariffs, rules of origin, anti-dumping measures, a common customs law, and common export promotion schemes.
The import duty rates applicable under the CET are as follows:
|Raw materials, capital goods, agricultural inputs, pure-bred animals, medicines||0|
|Finished consumer goods||25|
|Machinery and spare parts imported by licensed mining companies and used in mining activities||0|
|Machinery, spares, and inputs imported by licensed company for direct use in oil, gas, and geothermal exploration||0|
Goods originating in Southern Africa Developing Countries (SADC) or the East African Community (EAC) have preferential or nil customs duty rates, subject to meeting the Rules of Origin Criteria. Most imports are also subject to Railway Development Levy of 1.5% (except goods that are exempted from duty) and Customs Processing Fee (CPF) of 0.6% of the FOB value.
Excise duty rates apply on specific or ad valorem basis as follows:
|Item||Rate for FY 2019/20 (TZS)|
|Fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter||9 per litre/232 per litre|
|Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter or flavoured; ice and snow||58 per litre/64.05 per litre|
|Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of heading 20.09||61 per litre|
|Non-alcoholic beer||761 per litre/589 per litre|
|Beer made from malt||765 per litre/803 per litre|
|Beer made from 100% local unmalted cereals||450 per litre|
|Wine with more than 25% imported grapes; cider||2,466.45 per litre|
|Wine with domestic grapes, banana, tomato, rosella content exceeding 75%||200 per litre|
|Spirits, vodka, and whiskies||3,315 per litre/3,655.05 per litre|
|Cigarettes without filter containing more than 75% domestic tobacco||12,447 per mil|
|Cigarettes with filter containing more than 75% domestic tobacco||8,000 per mil|
|Other cigarettes not mentioned above||55,896.75 per mil|
|Cut rag/filler (imported)||28,232.40 per kg|
|Motor spirit (gasoline) premium||379 per litre|
|Motor spirit (gasoline) regular||379 per litre|
|Gas oil (diesel)||255 per litre|
|Jet fuel||0 per litre|
|Illuminated kerosene||425 per litre|
|Other medium oils and preparation||9.32 per litre|
|Industrial diesel oil||392 per litre|
|Heavy furnace oil||0 per litre|
|Lubrication oil||669 per m³|
|Lubrication greases||0.79 per kg|
|Music and film products||50 per unit|
|Item||Rate for FY 2018/19 (%)|
|Satellite and cable television broadcasting||5|
|Electronic communication services||17|
|Charges or fees by a telecommunication service provider for money transfer service||10|
|Charges or fees by a financial institution for services provided by such institution||10|
|Disposable plastic bags||50|
|Liquefied petroleum gas (LPG)||0|
|Motor car with cylinder capacity exceeding 1,500cc but not exceeding 2,000cc||5|
|Motor vehicle with engine size greater than 2,000cc but not exceeding 3,000cc||5|
|Old passenger motor vehicles (more than five years)||10|
|Old motor vehicles (eight years but not more than ten years)||15|
|Old motor vehicles (more than ten years)||30|
|Imported used spare parts (for vehicles, motorcycles, domestic and electrical appliances)||25|
|Imported furniture (per unit)||20|
|Aircraft (including helicopters, aeroplanes) but excluding commercial aircraft, yachts, and other vessels for pleasure or sport||20|
Fuel levy is charged on petroleum and diesel at a rate of TZS 313 per litre.
Petroleum levy is charged on petroleum, diesel, and kerosene at TZS 50 per litre.
Examples of instruments giving rise to stamp duty obligations include conveyances, leases, share transfers, and issue and transfer of debentures. For most of these instruments, the applicable stamp duty rate is 1% of the consideration.
Railways Development Levy (RDL)
RDL applies at the rate of 1.5% of the value of imported goods (cost, insurance, and freight [CIF]). The levy is not applicable to imported goods that have relief or exemption under the East African Community Customs Management Act 2004 (EACCMA 2004), goods in transit, pharmaceutical goods, etc.
Payroll taxes and social security contribution
Apart from individual income tax (deducted at source by the employer), payroll taxes include:
- Skills and development levy at 4.5% of payroll cash costs.
- 20% social security contribution, which is normally split equally between employer and employee (i.e. 10% each).
- Workers compensation fund tariff charged at 1% or 0.5% of cash sums paid to employees. The tariff is payable on a monthly basis (1% for private sector and 0.5% for public sector).
Under the gaming tax, gaming prize winners are taxed at a maximum of 20% on the amount or value of the winnings.
The TRA levies a property tax based on the value of a premises. The rates vary depending on the value and location of the property. For unvalued properties, TZS 10,000 is payable for a normal building and TZS 50,000 per storey for a storey building.
The Local Government Authorities are entitled to charge a 0.3% service levy based on turnover generated by corporate bodies in the relevant district.
Produce cess is capped at 3% on food and cash crops and 5% on forest products such as timber, charcoal, and logs. However, there is an exemption on the transportation of crops of less than one tonne from one district to another.